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County officials say pension board’s proposed fix would cost an extra $267 million
A proposed permanent fix from Cook County's Pension Fund board would cost $267 million more than expected and would achieve full funding only a few years earlier, Toni Preckwinkle's CFO says.

Monday, October 14, 2019
Crain's Chicago Business
by A.D. Quig

Cook County Chief Financial Officer Ammar Rizki at a Crain's editorial board meeting this month.

Cook County officials say a “surprise” legislative proposal from the Cook County Pension Fund to increase payments in the coming years would cost $266.68 million more between 2021 and 2024.

Cook County Board President Toni Preckwinkle's administration and officials from the pension fund have been in a months-long back and forth about permanent state legislative changes to secure the fund's future.

County Chief Financial Officer Ammar Rizki responded to the pension board’s September proposal in a letter Friday, saying the proposal would put an “undue burden on the county’s fiscal position in the coming years for little gain to the CCPF in the long run,” achieving their desired funding level only three years earlier.

In draft legislation, the pension fund proposed the county make a $588 million payment in 2022, $650 million in 2023 and $717 million in 2024—about $267 million more than the county was planning on.

"That is not really realistic in these times," pension committee chair Bridget Gainer said last month, describing the proposal as surprising. "I don’t know how it will fare in Springfield. I don’t think that’s something we’d want to take on now."

In September, the pension fund drafted its own legislation for Springfield lawmakers to consider that would have sped up payments from the county to bring the Cook County Pension Fund to 100 percent funding by 2051. County officials say they’re already on track to reach the fund's 100 percent funding ratio by 2053.

The county makes pension contributions in two ways—a statutory requirement based on a “multiplier” and a supplemental payment of sales tax revenues. That supplemental payment is made via a yearly intergovernmental agreement between the county and the pension fund and comes from a 1 percent hike in the sales tax Preckwinkle pushed through in 2016. The county plans to dedicate $527.9 million toward pensions in 2020 and launched a contingency fund in case of a downturn that already has $30 million in it.

Preckwinkle’s administration says it has paid an additional $1.3 billion to pensions since 2016, putting the fund on much more solid ground.

But while grateful for the extra money, pension fund officials say the annual agreement doesn’t allow them to plan or invest long term and could be undone with a change of administration or a new board of commissioners that might want to raid those sales tax revenues for another cause. If the fund isn’t able to secure a long-term fix, the county employee fund estimates it will be insolvent after 2040.

The two pension funds—one for county workers and the other for Forest Preserve employees—are just under 61 percent funded, with a combined $6.8 billion unfunded liability.

Rizki told Crain’s editorial board last week that Preckwinkle’s administration is taking a slow and steady approach to a long-term pension fix. It says the most recent proposal from the fund does not include essential changes, like retiree health care, payments to address potential shortfalls in benefits for Tier 2 employees, the fund’s governance and bringing the Forest Preserve pension under its umbrella.

“We are approaching our pension package with a comprehensive manner,” Rizki said Oct. 10. “The challenges the fund has highlighted . . . the biggest is actuarial funding on a long-term basis. That is something that’s our vision too. . . .Obviously the pension fund has a different view in some of these instances. We’re still hopeful to come to a compromise that works together for everybody. We’re not in a hurry to get anything done at the state level.”

While still willing to work with Preckwinkle’s administration, members of the pension fund board expressed frustration last month that the county was not acting quickly enough to address its needs. “This stuff is dragging too long,” pension fund board member Diahann Goode, a Teamsters Local 700 representative, said at a board meeting in September. “Politics aside, we’re talking about people’s futures. The county can’t have everything it wants. . . .People need to take action, stop stalling, stop using the politics to not get our stuff done.”

Aside from the speed of funding, another sticking point is board governance. Preckwinkle’s administration wants to shift the board makeup from two appointed and seven elected members to five appointed by the county board president and five elected—two county employees, an employee of the Forest Preserve, two annuitants from Cook County and one from the Forest Preserve.

The change would bounce Cook County Treasurer Maria Pappas from the board, a move that has previously incensed Pappas. The rest of the pension fund board said it was opposed to changing its structure. It says the current form “best represents and aligns the interests of the participants with the Retirement Board.”



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